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Last week, the Canadian financial sector’s response to Russia’s war of aggression in Ukraine was swift. Asset managers and companies quickly moved to sell their Russian holdings. The war in Ukraine was overshadowed by grim climate news. The International Panel on Climate Change (IPCC). BewareIt is clear that climate impacts have a greater impact than originally thought. The IPCC once again highlighted this fact. past timeFinancial institutions must stop financing fossil fuel expansion.
Despite the Russian case showing the financial sector can act quickly, we’ve yet to see commensurate action with respect to the climate crisis. This is why it’s more important than ever that Canada’s pension sector develop an industry-leading approach to responsible investing that aligns our retirement savings with both a safe climate future and the values of Canada’s leading institutions. This means investing in a sustainable economy that eliminates harmful fossil fuels and aligns the pension portfolio with the goal to limit global temperature rise to 1.5 C.
The time is limited. The IPCC warns against global catastrophe if not urgently taking transformative action in this decade. Its report It is clearIf the world fails to reduce its emissions by half by 2030 then the places where people live, work and play may disappear. The UN secretary-general So called it an “atlas of human suffering and a damning indictment of failed climate leadership,” with Nearly half the human raceHigh vulnerability to the effects of climate change once the window of opportunity for action closes.
Last week was a busy one. Pension fundsOther Asset managers Canada Around The The worldWe know that finance can swiftly act in accordance with ethical criteria, and they quickly disposed of their Russian holdings. Alberta’s pension manager described its decision to divest as “both values- and value-driven.”
This is however in stark contrast with their approach to the crisis. If it’s possible for investors to divest from Russian holdings to uphold our “values,” then it’s also possible for them to divest from the industries that are threatening the life of the entire planet, namely fossil fuels.
No one seems to be saying that divestment is inappropriate or dismissing the Russian invasion as symbolic politics. This is contrary to what we hear often about fossil fuels. And we have yet to see anyone argue that investors should try to “engage” with Russian firms to shift the position of the Russian state, rather than divest. Yet, we are constantly fed this line of thinking when it comes fossil fuel divestment to combat climate change. This is despite clear evidence. engagement doesn’t workCompanies whose core business is the exploration, extraction, refining, and transportation of oil, gas, and coal.
Some have argued that fiduciary duty remains core to understanding the different responses because “Both the investment and moral arguments point in the direction for divestment” when it comes to Russia, but not when it comes to confronting the climate crisis. This argument doesn’t hold up to scrutiny. More than 1,500 finance institutionsOver 40 trillion dollars in assets around the globe have already pledged to some degree of fossil fuel exclusion. Recent research has shown that Canadian pensions have been exempted from fossil fuels. This results in higher returns. From a financial perspective, the opposite is true. “it’s a lousy moment to sell Russian holdings at rock-bottom valuations.”
What are people reading?
These questions are coming to a head as Ontario’s University Pension Plan (UPP) holds a feedback period on responsible investing. The UPP is the new. $10.5-billion pension fund for faculty and staff from Queen’s University, the University of Guelph (U of G) and the University of Toronto (U of T). Trent University joined in January. The new fund consolidates university retirement assets under one portfolio. Plan members have a unique opportunity to assist the fund’s investing strategy. The UPP launched this week a responsible investment engagement processAll four universities will provide benefits for the beneficiaries. They also announced an Exclusion of Russian investments.
We are still waiting for a credible UPP climate strategy and exclusion policy, despite strong financial and moral evidence supporting the exclusion of fossil fuel investments. All universities have heard from plan members that they want a climate-safe portfolio for their pensions. The UPP hosted consultation sessions last year. Surprising majorityOf participating beneficiariesThe UPP was asked to develop a strong climate policy and remove fossil fuels from our pensions.
In November, 100 faculty and staff from Queen’s, U of G and U of T Signed a letterOutlining a detailed strategy. Two UPP responsible investing consultation sessions were held earlier this week. The discussion was dominated by calls for plan members to divest from fossil fuels. Both U of G U of TAlready committed to divestment from fossil fuel companies in their endowment funds. The UPP must fulfill those commitments, and do the same for our pension portfolio.
Given that pension funds in Canada rapidly dumped their Russian holdings, we know finance can act swiftly according to ethical criteria, write @KylaTienhaara, Stephanie Rutherford @WolfieProf, Andrea Paras @parasand & @PaulDownes10. #divestment
The UPP should develop a credible plan, with interim targets, to decarbonize our pensions portfolio by 2040. It should also implement a negative screening on new fossilfuels. Increase allocations for renewable energy and climate solutions. Establish a robust engagement program that requires companies align their business models with the Paris Agreement goals.
We invite faculty from all four UPP Universities to join us. We also implore the UPP not to stop listening and to follow through. It’s time for the UPP to prove that values in finance really do matter when it comes to preventing a catastrophic climate crisis on our planet.
Paul Downes, a professor of English Literature and American Literature at the University of Toronto, is the author.
Andrea Paras is an Associate Professor of Political Science at the University of Guelph.
Stephanie Rutherford is an associate Professor in the Trent School of the Environment.
Kyla Tienhaara is the Canada Research Chair in Economy and Environment and assistant professor in the School of Environmental Studies and Department of Global Development Studies at Queen’s University.
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